As currency runs dry in ATMs and banks across the country, many startups use the opportunity to make their service mainstream and essentialBiswarup Gooptu&Payal Ganguly | ET Bureau | Updated: November 18, 2016, 08:32 IST

As cash turns scarce, online grocers and food-delivery companies are reaping a minor windfall as hungry customers turn to them for their daily bread by paying for it digitally.

Even as other ecommerce peers are hurting from the withdrawal of cash-on-delivery as a payment option for online sales - following the demonetisation drive launched by the Union government last week - online food and grocery-delivery companies are seeing a spike in sales fuelled by shoppers choosing them over cash-reliant corner stores.

"Sales have increased by 5%," said Hari Menon, chief executive of BigBasket who estimates that while cash payments accounted for half of all sales prior to the demonetisation drive, it has now dropped to a fifth of all transactions in the past week.

To cash in on the rising demand these companies from Pune-based Faasos to on-demand delivery venture Grofers are launching a series of measures to woo customers at the store front and also ease transactions at the back-end.

Pune-based food-delivery company Faasos is offering a credit option to customers. "One significant aspect is we have a pay later option, extended to 70,000 of our loyal customers -they can take credit from us for 15 days," said Jaydeep Barman, CEO, Faasos, which registered an increase of 20% in orders over the last week.

Grofers is strengthening its technology and logistics infrastructure, including partnering with point-of-sale (PoS) terminal makers to add more delivery slots. "We have started adding more POS terminals and have also added to our workforce in Delhi and Mumbai," said Albinder Dhindsa, chief executive, Grofers, which has partnered with Pine Labs, a PoS terminal manufacturer.

"All our delivery boys have card-on-delivery option and we have stricter discipline on the ground to enforce payments with that option," said BigBasket's Hari Menon.

The convenience of paying online is driving many first-time users to the online grocery platform while meal orders from the working population have also moved to this space. "Before the surge, we were typically servicing 10,000-11,000 orders daily. Right now, we expect to do about 14,000 orders a day," Dhindsa said.

Experts are of the view that the rise in online orders for grocery and food is driven by two factors - more metro dwellers using digital payments for everyday meals and also choosing to go online for daily essentials which they would earlier buy from the neighbourhood kirana.

"Food and grocery are probably the only verticals in ecommerce that have benefited from demonetisation, all other online discretionary spends with CoD have taken a hit," said Sreedhar Prasad, partner - ecommerce at consultancy firm KPMG.

This transition to digital payments in a country, which has, historically, been cash heavy expected to help ecommerce companies save on the cost of processing cash-based orders and also minimize product returns, which is pegged at 20-30% of all online retail in the country.

The cost of cash-on-delivery orders is 22.5% of the order value or Rs 3050, whichever is higher. That is a major cost centre for ecommerce companies, which continue to operate on wafer-thin margins. Online food ordering platform Zomato, since the government's edict, had completely stopped all cash payments, but order volumes have risen still.

"We have in fact seen a huge spike in our online order volumes with a 200% increase in online payments," said a spokeswoman for the company. Online restaurant Freshmenu has also seen an uptick of 10% in its orders. "Close to 90% of our customers have moved to paying online as the ticket sizes are an average of Rs 300-400," said Rashmi Daga, founder, Freshmenu.